In recent years, Welty Products Corporation, a small manufacturer of industrial products for the waste management industry, has followed the practice of issuing a 10 percent stock dividend annually. Although the company's net income has been almost $4 million in each of the past three years, retained earnings have declined from about $10 million to about $6 million. What is the probable motivation for management's decision to issue an annual 10 percent stock dividend? What is the most likely explanation for the decrease in retained earnings? Given your explanation, would stockholders' equity also decrease by a like amount?

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The Answer of In recent years, Welty Products Corporation, a small manufacturer of industrial products for the waste management industry, has followed the practice of issuing a 10 percent stock dividend annually. Although the company's net income has been almost $4 million in each of the past three years, retained earnings have declined from about $10 million to about $6 million. What is the probable motivation for management's decision to issue an annual 10 percent stock dividend? What is the most likely explanation for the decrease in retained earnings? Given your explanation, would stockholders' equity also decrease by a like amount?

In Recent Years, Welty Products Corporation, a Small Manufacturer of Industrial